Some Parameters of a Successful Company

The credibility given to the company by a technology, or by the source of the technology, is a significant factor influencing the way companies decide to acquire a technology. Particular value is placed on gaining credibility or goodwill from governments, customers, market analysts and even from the company’s own top management academic institutions and potential recruits. For example, a smaller company’s collaboration with a large US chemical firm appears to have enhanced the former’s market credibility. Not only did the collaboration demonstrate the organization’s ability to manage a multimillion-dollar R&D project, but the numerous patents and academic publications that arose from it were also felt to have improved the company’s scientific standing. Similarly there are many examples. The rationale for the relationship was to influence future standards and to increase the credibility of its consumers telephone products in a market in which it was increasingly difficult to differentiate by means of product or service.

Corporate strategy

One of the most important factors affecting the balancing between in-house generated and externally acquired, technology is the degree to which company strategy dictates that it should pursue a policy of technological differentiation or leadership. For example, Kodak distinguishes between two types of technical core competencies: strategic, i.e. those activities in which the company must be a world leader because they represent such an important source of competitive advantage and enabling i.e. skills required for success; but which do not have to be controlled internally. Although all strategic activities are retained in-house, the company is prepared to access enabling technologies externally, if the overall technology is sufficiently complex.

Some companies adopt a policy of intervention in the technology supply market, until the market becomes sufficiently competitive to ensure reliable sources of technology continue to be available at reasonable prices. For example, the extent to which BP is prepared to rely on external sources of technology depends, amongst other things, on the nature of the supply market. When only few suppliers exist, BP will develop key items of technology itself, and pass these on to its suppliers in order to ensure their availability. However, once sufficient supplier has entered the market to make it competitive, its policy is to conduct no further in-house development in that area.

Firm Competencies

An organization’s internal technical capabilities are another factor influencing the way in which it decides to acquire a given technology. Where these are weak, a firm normally has little choice but to acquire from outside, at least in the short run, whereas strong in-house capabilities often favour the internal development of related technologies because of the greater degree of control afforded by this route. In such cases, the main driving force behind the acquisition strategy is speed to market.

Speed to market is a critical success factor for many firms in consumer markets. Such firms select the technology acquisition method that provides the fastest means of commercialization. When the required expertise is available in-house this route is normally favoured because it allows greater control of the development process, and is therefore usually quicker. However, where suitable in-house capabilities are lacking, external sourcing is almost always faster than building the required skills internally. Gillette for example, found that one of its new products required laser spot – welding competencies that the company lacked and, given the limited market window, was forced to go outside to acquire this technology.

Company culture

Every company has its own culture that is the way we do things around here. We will discuss culture in more detail, but here we are concerned with the underlying values and beliefs that play an important role in technology acquisition policies. A culture of ‘we are the best’ is likely to contribute towards a rather myopic view of external technology developments, and limit the potential for learning from external partners. Some organizations, however consistently reinforce the philosophy that important technical developments can occur almost anywhere in the world.

For example, Glaxo emphasizes that companies need to guard against becoming captives of their own in-house expertise, since this limits the scope of its activities to what can be achieved through internal resources. With this in mind the company has expanded its research effort by placing many of its more specialized R&D activities overseas. This, it is claimed allows its research to benefit from different cultural and scientific approaches, and from being brought into intimate contact with the many different markets it serves.